How Fast Do Markets Recover From a Swoon?
Markets bounce back from event-based shocks much faster than big bear-market-related sell-offs.
Markets bounce back from event-based shocks much faster than big bear-market-related sell-offs.
Tim Strauts: The stock market has experienced incredible volatility recently. From Aug. 19-25, the Dow Jones Industrial Average declined 10.5%. Declines of this magnitude in only five trading days are rare. Today's chart looks at periods since 1976 in which the market fell more than 10% in five trading days. It has only happened five times, and all the events are noteworthy.
The 1987 Black Monday crash and the 2008 financial crisis had the largest declines, at 29.6% and 18.2%. These falls were part of a broader bear market. The other three occurrences--the 1998 Russia default, the Sept. 11, 2001 terrorist attacks, and the 2011 U.S. debt-rating downgrade--were caused by an event that shocked the market. The declines weren't as extreme, and the market recovered more quickly, as we can see in the next chart. It took between 40 and 62 days to recover from the event-based declines.
The U.S. economy looks healthy, with growth of 3.7% in the second quarter. With a U.S. recession unlikely in the near term, it's more likely that the market reaction to China was overblown, and the U.S. market will recover in a similar time frame to the other event-based declines.
Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.
We’d like to share more about how we work and what drives our day-to-day business.
We sell different types of products and services to both investment professionals
and individual investors. These products and services are usually sold through
license agreements or subscriptions. Our investment management business generates
asset-based fees, which are calculated as a percentage of assets under management.
We also sell both admissions and sponsorship packages for our investment conferences
and advertising on our websites and newsletters.
How we use your information depends on the product and service that you use and your relationship with us. We may use it to:
To learn more about how we handle and protect your data, visit our privacy center.
Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.
To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.
Read our editorial policy to learn more about our process.